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      Question

      A poor farmer consumes bajra (an inferior good). His

      income falls due to crop failure. What happens to his demand for bajra and why?Β 
      A Demand falls because bajra is inferior Correct Answer Incorrect Answer
      B Demand rises because inferior goods see higher demand when income falls Correct Answer Incorrect Answer
      C Demand remains same Correct Answer Incorrect Answer
      D Demand falls because of Giffen paradox Correct Answer Incorrect Answer
      E Demand rises only if bajra is a Veblen good Correct Answer Incorrect Answer

      Solution

      Inferior goods have negative income elasticity. When income falls, demand for inferior goods rises (people shift from costlier foods to cheaper staples).

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